Buildings' safety legislation, as outlined in the Building Safety Act, remains enforced retroactively, a decision affirmed by the English Court of Appeal; a clarion call for increased caution among landlords and developers.
Building Safety Act 2022 Clarified in Recent Court of Appeal Decisions
The Court of Appeal has issued significant rulings on the scope and application of Part 5 of the Building Safety Act 2022 (BSA), providing much-needed clarity on the policy objectives, roles of developers, and the position of public funding in the remediation landscape.
In the case of Triathlon Adriatic Land, the Court unanimously decided that it is just and equitable to make a Remediation Contribution Order (RCO) under section 124 of the BSA, regardless of the date the defects occurred or the motivation of the applicant. This decision clarifies that the motive behind seeking RCOs does not affect the just and equitable assessment, and even a claimant without malice is entitled to seek these orders.
The Court also confirmed that the existence of other contractual claims does not prevent the court from ordering remediation contributions under the BSA. Furthermore, ownership changes to companies involved (e.g., acquisitions) do not exempt them from liability; investing in a company after the development’s completion means taking the risk of unforeseen remediation liabilities. However, it may not be just and equitable to require payment from companies with no real operational or developmental link to the building, despite formal "association."
For developers and leaseholders, these implications are significant. Developers and associated companies can be held responsible for historic building safety defects and ordered to contribute to remediation costs, even if these liabilities arise years later. Leaseholders benefit from a legal framework that enables compelling remediation contributions, often reducing their direct financial exposure to costly safety defect repairs.
The "just and equitable" test helps ensure that orders are fairly targeted but can impose substantial financial obligations retrospectively on businesses involved in the development or ownership chain. The Court of Appeal confirmed that a change of beneficial ownership will not affect the "just and equitable" test, meaning purchasers inherit the risk of unforeseen liabilities attached to a company.
The legislative intent and purpose of the BSA is to provide immediate protection to leaseholders against unaffordable bills, and RCOs are increasingly being seen as a cheaper and quicker alternative to other, more traditional remedies through the courts. The retrospective reach of the BSA means companies may be liable for remediation costs even if the Building Safety Act was not in force when works were carried out.
In summary, the "just and equitable" test under the BSA 2022 is a flexible judicial standard aimed at fairly assigning remediation costs related to building safety defects, reflecting the Act’s purpose to protect occupants and allocate liabilities realistically across developers, associated companies, and others in the property chain. The consequences of these judgments could be far-reaching and subject to further appeals.
- In the real-estate sector, investors should be aware thaturchasing a company with a history of building safety defects can transfer existing unforeseen liabilities to them, as the Court of Appeal has confirmed that a change of beneficial ownership will not affect the "just and equitable" test.
- For developers and property investors, the Building Safety Act 2022 presents new challenges in the realm of financing, as remediation costs related to building safety defects can be demanded retrospectively from developers and associated companies, even if these liabilities arise years later.
